Page 8 - Mar-Apr 21 - Reporter - web optimized

Insurance UPDATE

canada pension plan (cpp) increase:

3 reminders for employers

Contributed by: n individual’s retirement income generally be contributing 9.3% more than in 2020, further
Greg Pallone Acomes from a combination of personal savings, stressing employees’ finances.
hub international employer-based pension plans, and government Tips for Employers
plans, including CPP and Old Age Security (OAS).
ontario limited owever, that may not be enough: According to Canadians may worry about the contribution
(formerly Morneau one survey, 70% of Canadians are worried they aren’t increases to CPP, and employers need to monitor the
saving enough for retirement. How will changes in the
situation and support their employees.
Shepell) Canada Pension Plan (CPP) help alleviate the public’s
unease? These three tips can help:
To boost retirement savings, the 1. Consider the timing for other employee
"This year's federal government introduced the benefits. Employers often change other employee
benefits, such as increased cost sharing, making
CPP enhancement program at the
scheduled Canadian start of 2019. Whereas CPP is currently amendments to coverage or making additional
intended to replace one-quarter of matching contributions to pension plans, at the
Pension Plan an individual’s work earnings during start of the new year. However, as a major change
(CPP) increase, retirement, the enhanced program like the CPP enhancement hits employees, it may
will aim to replace one-third of those be best to reconsider annual changes. These kinds
intended to help earnings. of benefits changes should be introduced at the
increase retirement same time as other mandated major changes are
Changes for 2021 rolled out.
savings, comes at The major change in 2021 is an 2. Consider the impact of payroll deductions on
a difficult time for increased individual contribution, employees. Employers need to be aware of the
going from 5.25% of earned income impact this year’s CPP change has on employees.

many Canadians. to 5.45% (in 2018, the year prior to the If an employee is paid at a higher level than this
Employers should enhancement, the contribution was year’s YMPE, there will be little impact on them,
4.95%). since they are already being deducted by the
consider the However, after the challenges of maximum amount each year. They will only see the
challenges their a global pandemic and the economic increase in the contribution to 5.45%. But workers
uncertainty that went with it, some
earning less than the YMPE will notice the increase
workers face and individual contributors may be more dramatically.
concerned about receiving less take- 3. Consider employees’ overall retirement
take steps to home pay. readiness. Studies have demonstrated that many
support them." Even having more of an impact: nearing retirement age — think younger Baby
the change in the yearly maximum Boomers and older Gen Xers — are not prepared
pensionable earnings (YMPE). In for retirement. In fact, the CPP enhancements were
2020, the YMPE was $58,700. The YMPE increases designed specifically to address those concerns.
every year, typically by 1% to 3%. This year, however, Employers should endeavour to understand their
the pandemic eliminated a huge number of lower employees’ predicament and offer additional
and middle-income jobs, pushing average earnings support and education on retirement readiness.
higher. This led to a YMPE of $61,600 for 2021, an
increase of nearly 5%. HUB International’s team of qualified retirement
Although it may not seem like a large increase, plan consultants has extensive experience with all
applying the increased contribution of 5.45% to aspects of retirement planning, including CPP and
a 5% increase in YMPE means individuals may OAS.

8 LBMAO Reporter - March-April 2021 www.lbmao.on.ca